Still skin and bones

THE BUDGET IS HERE: Are the tax folks out there hoping for some more meat on the Trump administration’s tax reform framework in its first full budget today?

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Well, sorry, as our Aaron Lorenzo reported. Asked if President Donald Trump’s tax plan was incorporated in the budget, the president’s own budget chief said “yes and no.” Mick Mulvaney added that the one-page framework released close to a month ago was meant to jump-start the tax reform debate, before adding this revealing aside. “We do assume in this budget that that plan is deficit-neutral, just because it was, in all honesty, the most efficient way to look at it,” Mulvaney said. “Because if we said it's going to add to the deficit, then we have to go into more detail than what’s in the summary right now. If we say it's going to reduce the deficit, we have to go into more detail than what’s in it right now. And we simply are not in a position to do that.”

So is there anything new on taxes? Oh, yes. The White House, which is plugging the budget as a new version of welfare reform, says it would raise about $40 billion over a decade by stopping undocumented immigrants from claiming a pair of refundable tax breaks, the Earned Income Tax Credit and the Child Tax Credit. Rep. Sam Johnson (R-Texas) has been pushing some version of this idea for a while, and Republicans have periodically latched on to it as an offset for other initiatives.

Looking more broadly, POLITICO's Andrew Restuccia, Matt Nussbaum and Sarah Ferris examine how this budget takes aim at the constituencies that elected Trump.

And a reminder: The Trump "skinny budget" from some weeks back proposed a pretty modest cut to the IRS’s budget of some $239 million, or around a 2 percent reduction.

CAN’T STOP: The budget might leave tax reform watchers wanting more, but the administration’s outreach on Capitol Hill is still full speed ahead. Treasury Secretary Steven Mnuchin will head up this afternoon to meet with the conservative Republican Study Committee. Vice President Mike Pence met with House Ways and Means Chairman Kevin Brady and Rep. Peter Roskam (R-Ill.), a senior committee member, about the panel’s agenda on Monday, but the participants were pretty tight-lipped about how it went afterward.

IT’S TUESDAY — AND ARE YOU READY FOR SOME HEARINGS? It’s also 83 years since the bank robbers Bonnie and Clyde were ambushed and killed in Louisiana, and 86 days since their silver screen versions, Warren Beatty and Faye Dunaway, had that little Oscars incident.

YES, IT’S HEARING TIME: The House Ways and Means Committee will put its proposed border adjustment under the microscope today, months after the provision became the most hotly debated topic in the 2017 dash for tax reform.

It’d be tough to say that the border adjustment is in a better spot than it was when the year started — but, as POLITICO's Rachael Bade and Josh Dawsey report, Speaker Paul Ryan and Brady are escalating the intra-Republican debate about the controversial provision. Brady gave GOP members a messaging document on how to sell the border adjustment, which makes the case that 4 in 5 Trump voters back the idea even as the president has failed to embrace it. (Morning Tax’s favorite part was how not having a border adjustment puts the U.S. in league with Cuba, North Korea, Somalia and Syria — though, to be fair, the report also notes that the border adjustment should be viewed in tandem with a territorial system and lower rates.)

So here’s where we stand: Mnuchin and Gary Cohn, the director of the National Economic Council, have been talking down the border adjustment for a while. They’ve privately told lawmakers the idea is dead, Rachael notes, and Mnuchin took shots at the provision in a meeting with the centrist GOP lawmakers in the Tuesday Group last week. But one of the biggest points in the border adjustment’s favor is that there’s no real alternative out there, and Mnuchin and Cohn have not gone as far in public as they apparently have in private.

ANOTHER PROBLEM FOR THE BAT: It’s not exactly a golden age for bipartisanship, but our Brian Faler reports that senior Senate tax aides from both parties still have “basic questions” about how a border adjustment would work. Mark Prater, the chief tax counsel for Senate Finance Republicans, had questions about the amount of revenue raised, who (consumers? businesses? foreigners?) would bear the cost and how different the impact would be at various income levels. “I don’t have an official score. I don’t have distribution tables,” Prater said at a tax reform event. On the Democratic side, Victor Fleischer said policymakers needed to know more about the plan’s impact on financial services, while also accusing Republicans of trying to create a whole new system behind closed doors.

DID YOU KNOW THERE WAS A LOT OF BAT LOBBYING? Here’s a little flavor of what supporters and opponents of the border adjustment are saying going into today’s hearing.

The American Made Coalition, the pro-border adjustment coalition, said the House GOP plan “is like the value added taxes (VAT) used in more than 160 countries worldwide, only better,” before adding that it “supports reform that transforms our tax code from one of the worst in the world to one of the best.”

On the anti- side, the National Retail Federation proclaims in its prepared testimony that “we do not believe that a new tax system that shifts the burden of taxation to the consumer is good for our industry, which is the nation’s largest employer, or good for the American consumer.” Americans for Prosperity, the group with deep ties to the Koch brothers, basically put that idea into video form. As has become their wont, the leading coalition opposing the border adjustment, Americans for Affordable Products, released a “corrected” version of the Ways and Means messaging document. (Also of note: As pointed out in Rachael and Josh’s story, Brad Anderson, a former chief executive at Best Buy, had to clarify his position on the border adjustment after a supportive quote ended up in the Ways and Means report.)

WELL, THAT’S JUST ODD: Every time you think the Trump tax return saga can’t take another turn toward the weird — Pro Education’s Kimberly Hefling reports that a Louisiana man has been charged with trying to run a federal student loan tool to access the president’s tax records. The IRS and the Education Department took the tool offline back in March, citing security concerns and bewildering users of the program. What was left unsaid, via Kim: “During multiple hearings about the suspension, officials had not disclosed that Trump's records had been targeted. Timothy P. Camus, deputy Treasury inspector general for tax administration, did testify in May that a ‘prominent individual’ had been targeted in September using the tool. Camus also said that in November, the ‘same prominent individual's’ information had been sought using the tool ‘from an entirely different location.’”

INTERNATIONAL UPDATE —

TOPSY-TURVY FOR THERESA MAY: It certainly seems, at least from several thousand miles away, that British Prime Minister Theresa May is having issues straightening out the Conservatives’ tax platform ahead of next month’s general election. The latest, via Reuters, is about a so-called dementia tax: “In her biggest misstep of the campaign so far, May set out plans on Thursday to make some elderly people pay a greater share of their care costs, before hastily announcing on Monday there would be a limit. Questioned at an election event, she grew irritated at suggestions she was backing down.”

STATE NEWS —

GETTING CHIPPY: Wisconsin Gov. Scott Walker is upping the ante on his fellow Republicans who control the state Legislature, the Associated Press reports — vowing to veto an entire $76 billion budget if it contains a property tax hike. In a nice little twist, Walker made that threat via Twitter, prompting top GOP lawmakers to compare him to the president. "I don't know why he wouldn't call us instead of acting like Donald Trump and tweeting at us,” said Assembly Speaker Robin Vos. The other interesting part: Walker wouldn’t have to veto the whole budget to strike at a property tax increase, because Wisconsin governors have wide latitude to veto individual portions.

STOP US IF YOU’VE HEARD THIS ONE BEFORE: But House and Senate negotiators in Kansas once again touched base on a potential tax deal. The big issues — whether to raise individual income tax rates and to at least modify a provision that scraps state taxes on pass-through businesses — remain the same, but the Topeka Capital-Journal didn’t lay out much new reason for optimism on Monday afternoon. “The brief encounter by the three House and three Senate tax negotiators produced nothing concrete other than an agreement to reconvene later in the day.”

By the end of the day, the House had voted down a measure that would have hiked the income tax and ended the pass-through exemption.

QUICK LINKS

— A Brady constituent is going to Washington to speak out against the border adjustment.

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About The Author : Bernie Becker

Bernie Becker is a tax reporter for POLITICO Pro, where he is primarily responsible for writing the Morning Tax tipsheet.

He previously covered taxes for The Hill, and was an editorial assistant for The New York Times in Washington.

A native of Martinsville, Va., Becker has degrees from the College of William and Mary and the University of Maryland. He now lives in Northwest D.C. with his wife and young daughter. His hobbies include running, reading history books, eating spicy food and watching his daughter chase his cat.